Net lease office properties out with Q4 2025 results.

Key highlights:

• Sold 2 additional properties - a ~1yr WALT asset leased to ICF for $3.9m / ~$40 PSF and their S&ME property in Raleigh for $8.7m, a 6.3% cap rate (11.2yr WALT). ICF sale was 50% below my NAV estimate but S&ME was ~30% above (I had assumed 8% cap rate).

• Significant CPI-linked rent escalation at their Coralville, IA property (to $4m ABR from $3.25m). I now see valuation at ~$30m at a 12% cap rate (4.8yr WALT).

• Limited leasing, short-term 2 month extension at Arcfield in King of Prussia.

• Distributions of $15.95 per share made in period and Q1 2026 to-date.

Valuation

I estimate net liquidation value of $15.25 per share and see the portfolio trading at a ~10% discount at the current share price of ~$13.75. This reflects a ~12.3% cap rate and $85 PSF for the remaining unencumbered assets (excluding Intuit, which is worth less than the mortgage IMO with a mid 2026 maturity). Q1 2026 sales have broadly been in line with my valuation estimates.

I anticipate minimal retained cash flow in 2026 as assets have been sold at the ~$10m off annualized FFO is likely to be eaten up by leasing CAPEX needs. This results in a ~10% IRR from here absent any upside surprises on asset values.

Most likely place I could see this in a meaningful way would be Omnicom in Playa Vista, their largest remaining assets where the lease is short but location and asset quality are good.

Note: My previous NLOP update (linked below) had a NLV estimate that was too high - I failed to deduct the payoff of the Northrup Grumman loan from sales proceeds, which made that estimate $1.70 per share too high.